1. The results are in and not as bad as expected. Nine banks don’t need more capital. The banks in the best shape: American Express , BB&T , Bank of New York Mellon , Capital One , Goldman Sachs , JPMorgan Chase , MetLife , State Street and US Bancorp . The government says these banks do not need to beef up their balance sheets.
2. The bleeding has stopped. Shares of many banks have rallied in recent weeks on optimism about the economy and quarterly earnings which were better than expected.
3. The additional cash needed is to cope with a worst-case scenario (which many economist don't feel will happen). The government stress test was designed to project what would happen if the economy does worse than expected. We are seeing evidence of a slow recovery in progress already.
5. There are many bargains to be had for patient investors. If you like shopping for items when they're 25, 50 or 75 percent off and have a 3 to 5 year time horizon, I'm confident you will be rewarded with higher shares prices as the recession ends, growth resumes, and the financial system normalizes.
6. There will be more regulation so this mess won't happen again. Transparency is good for everyone and confidence will be restored.
Why is this blog post so short? I'm calling my clients now.
Bill Losey, CFP®, CSA, America's Retirement Strategist®, is the resident retirement planning expert for On the Money. He has been named one of America’s Top Financial Planners and is the author of Retire in a Weekend!. The Baby Boomer’s Guide to Making Work Optional. He also publishes Retirement Intelligence, a free weekly award-winning newsletter. Bill can be reached online at MyRetirementSuccess.com.